Confidence in UK North Sea up after tax breaks: Deloitte

Drilling for oil and gas in waters off Britain was 33 percent higher last year than in 2011 while deal activity surged by around a third in the period, found a study by Deloitte published on Friday.

"After several years of caution and uncertainty, we have a more positive environment, where a number of factors such as tax incentives, high oil price and appetite to invest have combined to make 2012 the most encouraging year for a long time," Graham Sadler, managing director of Deloitte Petroleum Services Group, said.

The British part of the North Sea was rocked by a tax hike in March 2011 which prompted dire forecasts about the future of production. Those warnings appeared to be borne out by a dramatic 19 percent slump in oil and gas output in 2011.

New tax breaks, for older oil fields, heavy oil fields, deep-water fields and others have since given the industry more certainty and are helping provide a shot in the arm for the region, where production has been in decline since 1999.

Deloitte's study found that interest in field development, key to ensure discoveries progress to the production stage, was at a 10-year high with the government granting 21 field development approvals, boding well for a return to output growth.

A study published

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